Inflation to be higher than 2016: Report

By Malum Nalu INFLATION is projected to be 6.8 per cent in 2017, slightly higher than the 2016 outcome of 6.7 per cent, according to the mid-year economic and fiscal outlook from Treasury. The report said this was reflective of the gradual recovery in the domestic economy, global commodity prices, especially crude oil price and the weak kina exchange rate against major trading currencies. “The headline inflation is projected to be slightly below the 2017 Budget projection of 7 per cent, reflective of the low March quarter inflation outcome, stable kina exchange rate and crude oil price remaining at low levels,” it said. “The March quarter headline inflation outcome was 1.1 per cent, lower than 1.8 per cent for the December quarter 2016. “Prices rose across all the major urban centres with Lae increasing by 1.4 per cent followed by Port Moresby (1.2 per cent), Alotau-Kimbe-Rabaul (0.9 per cent) and Goroka-Mt Hagen-Madang (0.7 per cent). The major drivers of March quarter inflation were food and non-alcoholic beverages (up 1.1 per cent), clothing and footwear (up 0.6 per cent) and restaurants and hotels (up 0.3 per cent). “Prices of alcohol, tobacco and betel nuts, household equipment, transport, communication, health and recreation goods and services have also increased but not as strong as the December quarter, hence, contributed to the low March quarter inflation outcome. “Excluding seasonal and price control items, inflation in the March quarter 2017 rose by 0.4 per cent, reflective of the increase in the prices of fuels and lubricants (up 1.6 per cent), housing (up 1.3 per cent) and food items (up 1.1 per cent). “Imported inflation grew slightly by 0.3 per cent in the March quarter. “Prices have increased for boys’ wear (up 2 per cent), fuels and lubricants (up 1.6 per cent), oils and fats (up 1.6 per cent) and men’s wear (up 1.2 per cent).” The report said overall, the March quarter inflation was not as high as 1.1 per cent for the previous quarter, reflective of decline in the prices of head wears, sewing items and household furniture and fittings. “Domestic inflation was 1.6 per cent in the March quarter 2017 due to the rise in the price of fruits and vegetables (up 4.9 per cent), betel nuts (up 4.7 per cent), rental (up 2.0 per cent), cooking (up 2.9 per cent), household maintenance (up 1.4 per cent), motor vehicle registration and maintenance (up 2.8 per cent), medical supplies (up 0.8 per cent) and accommodation (up 0.6 per cent),” it said. “Overall, the March quarter inflation for domestic goods and services was not as high as 1.1 per cent for the previous quarter, reflective of decline in the prices of alcohol, beverages and tobacco, fish and housing maintenance. “Generally, headline inflation over the first quarter of 2017 averaged 6.0 per cent, a moderating trend from 6.8 per cent and 6.6 per cent in the last two quarters respectively.”